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Ep. 1842 - Gas Prices Are Out Of Control. Here's What No One Is Telling You.

38m 7s

Ep. 1842 - Gas Prices Are Out Of Control. Here's What No One Is Telling You.

A growing global energy crisis is unfolding, driven not just by the war in Iran but by direct attacks on Russian fuel infrastructure by Ukraine and disruptions in vital oil shipping routes, especially through the Red Sea. These actions have drastically reduced global diesel supplies, causing prices to spike to record levels and forcing refineries to shift output away from gasoline, which is now in short supply. The situation threatens to reach a critical "operational stress floor" where pipelines and refineries can no longer function, risking rationing, inflation, and economic collapse. While conventional wisdom attributes high gas prices to geopolitical conflict, the root cause is a physical failure of energy infrastructure—something that mainstream financial institutions like JP Morgan now acknowledge as beyond traditional modeling. U.S. energy reserves are critically low, and proposed government interventions, such as export bans or price controls, risk worsening shortages by reducing refining capacity. The crisis has profound political implications, as soaring fuel costs could benefit Democrats by fueling public anger toward Republicans, while also aligning with left-wing goals of accelerating a green transition. The speaker warns that inaction—especially continued military escalation—could lead to a societal collapse comparable to Europe’s energy failures in recent years. Urgent action is needed to stop attacks on energy infrastructure, restore supply chains, and prevent a collapse that could result in widespread suffering, economic ruin, and potential loss of life.

Transcription

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English
Conventional wisdom is that high gas prices are the result of the war in Iran, that they're going to result in heavy losses for the Republicans in the midterms, and that the cost of living is going to remain high for the foreseeable future. But this consensus view, while not entirely wrong, is actually a simplistic and very optimistic version of events. The truth is actually worse than what conventional wisdom says. The truth is that we're now craning towards a potentially historic energy crisis and solving it won't be easy because it's a physics problem, not simply an economic one. There are a lot of theories about where this potential energy crisis is coming from. We just spoke to a White House official off the record who posited one theory, which we'll talk about in just a moment. But before we get to that, we need to establish that as hysterical as it may sound, and as depressing as it is maybe to hear on a Monday, it is indeed the case that a full-blown catastrophic energy crisis could be on the horizon. In fact, that is actually becoming something of a mainstream opinion if you know where to look. According to analysts at major financial institutions, including JP Morgan, we could soon realistically hit the operational floor for the global energy system, which in the worst-case scenario could lead to the point where pipelines, lose pressure, refinery is have to shut down to protect their equipment, and gas stations run out of fuel to sell. Now, nobody really talks about this, but as it turns out, fuel infrastructure requires a certain minimum amount of fuel to function. So think of it like your body. You know, requires a certain amount of blood running through the veins or else it will shut down completely. When it comes to our oil infrastructure, that buffer is now in danger of failing, and it's not entirely because of the war in Iran, which becomes clear when you realize that the vast majority of oil exports from the Middle East are sent to Asia, not the Americas. But there is a supply shock, and we need to talk about it because the magnitude of the risk can't be overstated. Every civilization requires energy to function. Without energy, we go back to the Stone Age. I mean, look what's happening right now in Europe. It was just a few years ago that Germany, the biggest economy in Europe, got rid of all of their nuclear power plants. They shut them all down in favor of renewables, and they laughed at anybody, including Donald Trump, who said that they were making a fatal mistake, even though they obviously were. And around the same time, Germany ran out of firewood, completely. The price went up 100%, and then nobody could buy it anymore. Loggers put GPS trackers on their firewood because theft became so rampant. People began using wood chips, in desperation, in neighboring Poland. Instead of lining up outside the Apple store for the latest iPhone, people were queuing for days outside of coal mines, hoping for some fuel. Now this statistic sounds too insane to be true, but it is true. Every year in Europe, more than 360,000 people die from cold-related excess mortality, otherwise known as cold temperatures. And that includes many elderly people living in their homes, which don't have adequate heating and other causes. Now that's more than eight times the number of Europeans who die from heat-related causes, which is pretty inconvenient if you're a big believer in global warming, turns out the problem is maybe the opposite. In the United States, by contrast, we only have around 1,000 hypothermia deaths per year, mostly drunk people who get lost in the woods during the winter, homeless drug addicts, and that sort of thing. But even by the most liberal estimates, only around 40,000 Americans die annually for a reason that can be linked in some tangential way to cold temperatures. So here's another way to measure the distinction to put it in perspective. In America, around 44,000 people die from so-called gun violence every year. That includes mass shootings and suicides. That's a whopping 12% of the total number of people who die in Europe every year from cold weather. So anytime you hear Europeans claim that America is dangerous because of all the "gun violence," tell them that Europe is dangerous because people freeze to death all the time. And these are numbers that are unthinkable in the United States, but if we continue on this trajectory, they're not going to be unthinkable forever. We've taken our energy production for granted, and that could be a fatal mistake in a very literal sense. Before I go into detail about how exactly we might see a failure of global energy infrastructure, I want to start with this communication that I just mentioned that we just receive from a former White House official. Now, I don't normally share communications with Washington insiders for the simple reason that I don't know any Washington insiders, nor do I have any interest in knowing any Washington insiders. Most people in conservative media go to great lengths to cultivate relationships in Washington. My approach is essentially the opposite of that, but this former White House official got in touch with one of my producers over the weekend while talking about high gas prices. And I thought this statement was interesting, so I'll pass along what the official said. Well, it's Zelensky. It's literal Western civilization's suicide. Europe and the United States are funding their own energy crisis. Now, at first when I heard that, it sounded like typical White House messaging to me. Obviously, they want to distract attention from the war in Iran, which does also play a part, is a factor in this whole picture, obviously. And they want to blame Ukraine for high gas prices. But let's take the claim seriously for a second. So this is footage of President Trump speaking at a golf tournament just a week ago. Listen. We don't hit diesel fuel because that's hurting. That's hurting the world. We don't want him to hit diesel fuel. He's hitting diesel refineries. Okay, so one day after those comments, Trump posted the following message on truth social. He said, quote, "Ukraine has agreed not to hit Russian energy targets. Russia has agreed to do likewise." Now, we have no reason to think that Trump was lying about this. It would certainly be a strange thing to make up. And indeed, if true, it would be a major breakthrough. Ukraine has been bombing Russia's fuel infrastructure. There are fuel depots, storage tanks, pumps, and so on. For a long time now, they've reportedly taken out roughly a third of Russia's refining capacity, which has led Russia to ban the foreign sale of its diesel, which is no small thing since Russia is or was the second largest diesel exporter in the entire world. This is why diesel is now more expensive than it's ever been in recorded history, had more than $6 a gallon. Yes, diesel is right now more expensive than it has ever been. So there's the chart just to prove it if you didn't believe it. And how does this affect you? Well, I think that should be pretty obvious. It affects you, obviously. But there are two main ways. First of all, pretty much everything you buy was transported on a semi-truck or a cargo ship or a freight train at some point, all of which run on diesel. And when diesel supply goes down, price goes up, which means the costs are passed along to you when you buy things at the grocery store, Amazon or anywhere else. And secondly, refineries outside of Russia are now yield switching to diesel to maximize their profits, meaning they're refining less regular gasoline as a result, which drives up the price of regular gasoline. Remember, diesel and regular gas come from the same barrel, but many refineries are capable of switching their output to some degree. According to Goldman Sachs, the price difference between diesel and gasoline in the United States is now over $60 per barrel when it was just $3 a barrel one year ago. So there's much, much more money to be made refining diesel right now. And because refineries are already operating at full capacity, any effort to refine more diesel means that less gasoline will be refined. And that's why global exports of gasoline have dropped 24 percent in the past year, everyone's switching to diesel if they can swing it. From March to August of this year, diesel yields in the United States are well above their historical averages, while gasoline yields have been cut. And meanwhile, demand for gasoline has not gone down. In fact, it's gone up, especially in Russia, since many of their oil refineries have been blown up. So if Ukraine agreed to stop bombing Russian refineries and allowed the world's number two diesel exporter to get back to refining diesel, that would be good news for the American consumer, unequivocally. And that's what Trump said was happening on Monday. But that night, Ukraine's leader, Zelensky, spoke to reporters and contradicted the President. He stated that, quote, "There's now a strong U.S. proposal for a mutual halt to strikes on critical infrastructure." And Zelensky said that Ukraine is ready to support de-escalation, but only if Russia would agree in turn to stop bombing Ukraine's infrastructure. Okay, fast-forward six more days to last night, and Zelensky has clearly given up on that whole plan. He posted this footage of burning Russian refineries, demonstrating quite clearly that Ukraine has actually doubled down on their strategy of destroying Russia's fuel infrastructure. On social media, Zelensky then bragged about what he had done, quote, "Our long-range responses had a very significant impact in the Moscow region last night, one of Russia's as key oil industry facilities and the aggressors, logistics facilities were hit. These are billions of dollars that sustain the war machine. I thank our warriors for their accuracy. The security service of Ukraine, together with the unmanned systems forces, the special operation forces, the defense intelligence of Ukraine, and the foreign intelligence service. I thank everyone who has strengthened in Ukraine's long-range capabilities. I'm grateful to everyone who compliments our long-range responses with responses through sanctions. Glory to Ukraine. Now, remember when we were supposedly arming Ukraine with defensive weapons and gave them explicit instructions not to escalate the war by bombing Russian infrastructure. Shortly before the Biden administration left power, they rescinded those restrictions and apparently under the Trump administration. Zelensky is happy to say one thing and do another. No one is stopping him. So now he is openly celebrating a military campaign that in addition to raising the possibility of World War III in a very direct way, is also making day-to-day life much more miserable for millions of Americans. So why would he do that? Why in a million years would he dream of doing such a thing? Let's go through the numbers if only to provide some historical context. By some estimates this year, we've seen the largest surge in gas prices in percentage terms from January to the summer peak of any midterm election year in the past century. And it's not even close. So gas has now reached $4.48 a gallon, on average, which was roughly $1.20 more than last year. The typical sedan is now around $20.00 more expensive to fill up as compared with 2025. And if you drive an SUV or a truck, you're easily paying $30 or $40 more than you used to. You're paying around 52% more for gas at the moment compared to January. The previous record in a midterm election year was dramatically lower, just a 27% increase in the price of gas all the way back in 2002. So we have doubled the previous record when it comes to the increase in the price of gas. This is unsharted territory in the modern history of this country. And don't take my word for it. CNN brought out the nerd with the totally unnecessary smartboard thing to tell you the same thing. Watch. You're in the course of midterm year, but never this high. This is record breaking. We are talking record breaking for a midterm this century. Changing gas prices from January 1 to September 14. The average for a midterm cycle this century is 18%. But look at this on the right side of the screen. 52% rise this year. 52% rise has set up like a rocket, right? Look at that. My good discretion is by far the highest on record. The prior high was just 27%. This is nearly double the prior record high. We are talking really, really large jump. As always, it's a good thing to have them there. Circling the big number, the big red number, 52%. It's in huge red block letters. And so it's 52% and then there's an arrow pointing up. But if you didn't notice it that he's there to circle it also in case you didn't see it. Anyway, that's not even getting into the cost of groceries or heating oil, which is a pretty big deal for the millions of Americans who would prefer to survive the winter. Home heating oil prices just came out and they've increased by around 75% year-over-year in parts of the Northeast, including in Maine where several, several very important races are going to be decided in November. Control of Congress could very well come down to how people vote in Maine and as it stands, it's not looking very good. In fact, it's not even looking good in Kansas anymore. Where Republicans have won every Senate race since 1932. The incumbent Senator Roger Marshall was just booed by a large crowd of the state fair. And the Chair of the Kansas Public and Party in an interview with the Wall Street Journal is publicly asking national Republican groups to spend more money in the state, which is never a good sign. As the Chair put it quote, "Kansas gets overlooked a lot "because we are reliably red, but this is a weird cycle." Yes, this is a weird cycle. Now, even taking into account that the incumbent party usually loses seats in a midterm election. This is shaping up to be a very weird cycle indeed. And that's very good news for Zelensky, who has obvious reasons to prefer a Democrat-controlled Congress. Ever since the war in Ukraine began, Democrats have been unanimous in their support for why writing blank checks to Zelensky. As recently as this summer, the House passed a $9 billion aid package for Ukraine by a vote of 226 to 195 with near unanimous Democrat support. The only no vote was Ilhan Amar, who didn't like the sanctions against Russia that were included in the bill. A grand total of 18 Republicans supported the aid package. So there's no question that for Zelensky, it would be very beneficial for Republicans to suffer a massive defeat in the midterm elections. He wants to flood Congress with Democrats who will vote to send Ukraine even more money. And one way to do that, of course, is to give Americans a reason to despise their incumbents. Destroying the world's fuel supplies, one way to achieve that. Hike up our gas prices at a midterm election, and that will help him get rid of the people that he doesn't want in Congress, in our Congress, so he gets the people that will write him the blank check. You don't have to be a conspiracy theorist to connect the dots here. And by the way, even if you put aside these strategic political considerations, a lot of Democrats, by their own emission, want higher gas prices, because they think it will hasten our transition to a so-called green economy. This has been a long-term ideological objective of the left, and you should keep that in mind. Whenever you see Democrats going on television pretending to care about high gas prices, they spent the last decade telling us, again and again, that expensive gas is good for the environment. We should want it. The Seattle Times even published an article during the Biden administration entitled, "High gas prices, they're just what we need." And in case you forgot that, here's what they said at the time, quote, "The biggest paradox of the moment is Americans complaining about high gasoline prices when climate change is growing worse. Carbon needs to be priced high enough to keep it in the ground instead of burning it into the atmosphere." This is essential to preventing global catastrophe. The AP ran a similar article quoting experts is saying that, quote, "Fuel prices that are high have a long-term ability to cut demand, and the administration wouldn't mind seeing that." Another expert at Berkeley said, quote, "High gas prices are unequivocally good for fighting climate change because people use less fossil fuel and emissions go down." Just this year, the United Nations expressed excitement that the war in Iran would accelerate our transition to renewable energy. This is from Reuters, quote, "The Iran war is supercharging the world's shift to renewable energy as countries scramble to reduce their exposure to volatile oil and gas markets." The UN climate secretary said, early signs indicate the war, which began two months ago, was speeding up some country's low carbon transition, renewables offer safer, cheaper, cleaner energy that can't be held captive by narrow shipping strates or global conflicts. So this is a very long-term goal for the left. They've been very explicit about it and now they're closer than ever to achieving it. Going a bit on time is supposed to be the responsible choice and yet you can still spend half the night awake, reviewing a conversation from 20 years ago that nobody else remembers. Then the alarm goes off and apparently you're expected to function like a normal person. That's where beams dream powder comes in. It's a nighttime powder formulated to help you fall asleep, stay asleep and wake up refreshed. 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Here's the worst case scenario for how this will all play out. And I can't help it, I'm just the optimistic type. Or to put things in terms of the Lindsey Clancy, Jerry, could understand. I'm a Sagittarius, I don't know what I am, I'm something. The main risk at the moment, even aside from the midterms, is that Republicans will embrace an energy stop-cat measure that makes the problem significantly worse than it already is. This is from Bloomberg from a few days ago. Quote, "Send a majority-liter John Thun said he's open to exploring an export ban for diesel fuel as average national prices surge past $6 a gallon. We'll be looking at any proposal that is a viable solution, but I do think if we have the supply in this country and we're exporting it right now, that might be one way of getting at it. If that would take pressure off of prices, you know I'm open to exploring it." Thun said an export ban probably makes more sense to him than suspending the diesel tax in action recommended by Democrat James Telerico. Oil industry executives have warned that while an export ban would initially lower prices for the U.S. consumers, it would ultimately backfire. Every company's would likely respond by cutting crew production and fuel refining, ultimately prices for gasoline could increase $0.15 or more per gallon. Meanwhile, Chuck Grassley just posted this message on X when he attacks a big oil and proposes more government regulation, quote, "Big oil is telling us we can't embargo diesel. If true, they still don't have to make some profits off U.S. farmers and truckers that they make in foreign sales, America first." So he's also floating in embargo of diesel or alternatively some kind of price control on domestic sale of diesel, he says, and I quote, "They don't have to make the same profit off of U.S. farmers and truckers." This is exactly the kind of rhetoric you expect from Bernie Sanders or Elizabeth Warren. Here we have a government bureaucrat, someone who's held political office for all 5,000 years of his life, saying private businesses don't have to earn profit. Therefore he wants to take over one of the most important markets in the world, which is the market for diesel fuel, where the United States is the top exporter. Well, actually Chuck Grassley, here's the reality, the oil companies, like any other company, they make profits, they're entitled to whatever profits they can get, which out works in the market. That's not because they're good people or because they deserve it or anything else. It's because once you let the government take over the market, then everyone will be totally screwed in very short order. That's always what happens in every single case when government bureaucrats start implementing price controls, especially in very complicated markets they don't understand. As any Republican actually thought about the effects of an export ban or the effects of price controls on diesel in the U.S. market, do any of them remember the shortages and gas lines from the last time the U.S. attempted an export ban like this, back in the 1970s, which aggravated the shortages caused by the Arab oil embargo? Now put aside how many problems we'd be causing for our alleged allies in Europe would have to go back to stealing firewood and stay alive logically. If we impose an export ban and price controls, then profit margins for domestic suppliers would collapse overnight and that means a less diesel production and more expensive goods that you buy from Amazon or anywhere else and guess what? As we said, gasoline, jet fuel and diesel all come from the same barrel. There are no diesel factories. If you manipulate the market so that diesel is suddenly unprofitable, they're going to scale back on their refining and that's going to affect regular gasoline as well. It'll affect the prices of airline tickets, it'll affect everything. Now it's true that China has restricted diesel and gasoline exports, although nothing on the scale that Republicans are talking about right now, but there's a catch, which is that China has spent a long time ramping up their coal production as an alternative fuel supply. China now accounts for something like 50% of all global coal production, which they use for two purposes, creating synthetic natural gas and substituting for natural gas power plants. Meanwhile, our coal production is down something like 50% since 2008, so that's a big distinction. At the same time, China has been pushing electric vehicles on its population, which naturally reduces the demand for gasoline. In other words, if we implement Chinese style export controls, we're running several risks that they aren't taking, at least not the same degree and no one in Washington and either party has apparently considered any of this. Well, on the same lines, evidently, no one considered the fact that the Saudis have a very vulnerable east-west pipeline that stretches for around 750 miles from the east, where they produce the oil to a port in the Red Sea. This is the pipeline they're using now that the Strait of Horde News is compromised. But for years, we've known that this pipeline is vulnerable to another choke point at the Red Sea, where the Houthis, terrorists from Yemen, who are backed by Iran, are now using drones and missiles to disrupt shipping. They've just conducted a lightning offensive to seize a vital maritime choke point in the region, so the warlords are basically in control of shipping traffic in the area of Param Island, which is how you get into the Red Sea. And as a result, there's now another problem to worry about, which is a shortage of tankers. This is one of the Wall Street Journal quote, "Drawn attacks that shut Saudi Arabia's bypass pipeline earlier this month have forced more crude back to the Strait onto a tanker, mostly already stretched thin. The impact has spread worldwide, as longer voyages and shuttle runs around Hormuz tie-up ships and push the daily rate of hiring oil tankers to records. These sudden supply crunch among oil super tankers, known as very large crude carriers or VLCCs, has boosted the cost of hauling oil through the Strait to the highest on record earlier this month, the cost of hiring an oil super tanker to load inside the Persian Gulf and transit the Strait of Hormuz topped a million dollars a day, according to maritime intelligence firm Windward. That works out to use $26 a barrel or roughly a quarter of the crude's value based on the current market price, normally shipping costs or a fraction of the value of a crude cargo." So somehow no one foresaw this development when the war planning was going on. We were told that Iranians would, if you remember, they would rise up and take their country back, which hasn't happened. But we weren't told that there would be a shortage of oil tankers, as well as oil in general. You know, there used to be a category of clothing called dressing like an adult. You weren't wearing a suit. You weren't going anywhere particularly formal. You just put on decent clothes because you were leaving the house. We've mostly abandoned this concept. I'm afraid, but I'm trying to keep it alive and Tacovas is helping. I like their boots. They're very comfortable and they look just as good with a normal pair of jeans as they do when you need to dress things up a little bit. And more importantly, like I said, they're actually comfortable Tacovas. 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It was widely reported at the time as a betrayal because that's exactly what it was. It was deliberate sabotage. By the time the Iran War began, the reserve was back up around 415 million barrels, still a fraction of what it used to be before Biden. And then since this latest war began, the White House has announced plans to release around 170 million barrels, which brings the reserve down to its lowest level since 1983. So now we're down to between 240, 280 million barrels, which is significant because, according to the federal government, around 100 million of these remaining barrels cannot be deployed at all for any reason due to a mixture of construction outages and cavern outages according to a government watchdog. But really, we're running on fumes, in other words, you know, there's no backup. As part of the reason why even mainstream analysts, particularly JP Morgan, have been modeling a worst-case scenario lately, so I'm going to read from one of their reports from May of this year. This is what it says. If the straight is not opened by September, global inventories could hit an operational stress floor of 6.7 to 6.8 billion barrels, after which demand destruction would occur at a faster pace, mostly in Asia and Europe. Now, this disaster scenario hasn't come to pass yet because demand has been lower than they forecast. But it's still a possibility. And more recently in a note this week, JP Morgan announced that they've given up on trying to predict oil prices, saying, quote, "We simply don't know how to model the end game." So what's the operational stress floor, quote unquote, of global inventories of oil exactly? Well, here's what it could mean in practice. Once oil hits the operational stress floor and stays there for a sustained period of time, It becomes. It was very difficult for any buyer to purchase oil no matter how much he's willing to pay. That's because the pipelines and the refineries and storage tanks are not allowed to go below a certain level of oil. If they go below the operational limit, then the machines themselves break. The result, as JPMorgan put it, is demand destruction, which is a polite way of saying rationing. The market can't provide any more oil, so governments have to use force to prevent people from using it. The global economy would in all likelihood crash. Many people would die. Inflation would reach historic levels, and we would enter in all likelihood an economic death spiral. That's not a risk that I'm inventing, you know, just to get your intention. It's from JPMorgan, which is one of the most established mainstream financial institutions in the world. Did you hear about this? Has anyone told you about it? Probably not, because if they did that, then you'd demand solutions. An energy crisis is one of the worst things that can happen to a civilization. We are currently corigning towards one. To the extent that our politicians do anything, it should be their number one goal to prevent something like that from happening. So what are they doing about it? As far as I can tell, they aren't really doing anything, but that's not because they don't have options. The first thing they should do is tell Zelensky, not ask, tell Zelensky to stop bombing Russian refineries immediately. Because of the incredible harm it's doing to us, it's not about Russia. And if he refuses, if he continues to lie to us while he brags about destroying Russian fuel infrastructure, then we should bomb Ukraine until Zelensky is removed from power. We cannot tolerate this anymore. He's taken billions of dollars from US taxpayers and now he's deliberately tanking the global market for diesel. It's unconscionable. He is a threat to us. We aren't simply wasting our money on Ukraine. The return on investment has been overwhelmingly negative. We are suffering for it. And we need to shut these con artists down immediately. The second thing we need to do is end this ridiculous war in Iran. Some of us warned that the war would have this result when it first started. We were shouted down by many on our own side, but we were right. And we've been proven right every step of the way. And now here we are. And it has to end. And next we need to ramp up the oil exports from our newest puppet state, Venezuela. This should be the advantage of having it as a puppet state, which we do. And we should make manifest destiny real again. Make it great again. And take over all the oil we can get in Cuba and Africa as well, which is significant. If we need to, we can move on to Canada. All these countries are right next door. They're all communist and dysfunctional. They're not using their resources to any significant degree. And so we should take what we need for the good of our own people. The alternative is too unthinkable. It just shouldn't be an option on the table. Now we elected this administration to come up with solutions like this, solutions to problems that could realistically destroy this country and civilization. This is why Donald Trump beat Kamala Harris. She was talking about racial equity and making sure black people didn't lose their bitcoin or whatever. Donald Trump won because he said he would make life better for everyday Americans in a real tangible way. And he now has an opportunity to do that. If it doesn't happen, if the GOP doesn't step up, then they deserve everything that's going to happen in November. We have one chance now to stabilize a situation that is rapidly spiraling out of control. We can take that chance or we can become Germany or Poland. And instead of waiting outside the Apple store for the latest iPhone or whatever, we'll be lining up outside the coal mine, begging for some fuel. Our children don't freeze to death. It sounds unthinkable, but every great tragedy seemed unthinkable before it happened. Every great empire thought it was untouchable before the fall. And with everyday this war drags on, as even alleged conservatives openly embrace the rhetoric of communists, our own fall, not simply the fall of the GOP, but of the entire country, becomes more and more likely. That'll do it for sure today. Thanks for watching. Thanks for listening. Talk to you tomorrow. Have a great day. Godspeed. You'll be allowed on pants, you'll hear me okay. I seek forgiveness from Allah, the Almighty, we cannot run and hide. Muhammad is the messenger of God. And is no God but Allah. What do you say? We turn those vessel beams into a fine red mist. You need a course in safe weapons handling.

Podcast Summary

Key Points:

  1. A severe global energy crisis is emerging, driven by supply shocks including war-related destruction of Russian refineries and disruptions in key oil shipping routes.
  2. Ukraine’s ongoing attacks on Russian fuel infrastructure have severely reduced global diesel supplies, leading to sharp price spikes and a significant shift in refinery outputs toward diesel at the expense of gasoline.
  3. The U.S. and global energy systems are nearing an "operational stress floor" where pipelines, refineries, and storage facilities can no longer function without fuel, risking rationing and market collapse.
  4. Political and economic factors—including Democratic policies promoting high fuel prices for climate transition—exacerbate public suffering and may contribute to political instability during the midterms.
  5. A Republican proposal to ban diesel exports or impose price controls would likely backfire, reducing domestic refining and worsening fuel shortages and prices.
  6. The strategic petroleum reserve is critically depleted, with only 100 million barrels remaining deployable, leaving no buffer against demand shocks.
  7. Analysts like JP Morgan now admit they cannot model oil price outcomes due to the complexity and volatility of the crisis, signaling a fundamental breakdown in energy forecasting.
  8. The speaker argues that political leaders must act decisively—by halting Ukrainian attacks on Russian energy infrastructure and ending the war in Iran—to prevent a full-scale energy collapse that could lead to societal breakdown.

Summary:

A growing global energy crisis is unfolding, driven not just by the war in Iran but by direct attacks on Russian fuel infrastructure by Ukraine and disruptions in vital oil shipping routes, especially through the Red Sea. These actions have drastically reduced global diesel supplies, causing prices to spike to record levels and forcing refineries to shift output away from gasoline, which is now in short supply. The situation threatens to reach a critical "operational stress floor" where pipelines and refineries can no longer function, risking rationing, inflation, and economic collapse.

While conventional wisdom attributes high gas prices to geopolitical conflict, the root cause is a physical failure of energy infrastructure—something that mainstream financial institutions like JP Morgan now acknowledge as beyond traditional modeling. S. energy reserves are critically low, and proposed government interventions, such as export bans or price controls, risk worsening shortages by reducing refining capacity.

The crisis has profound political implications, as soaring fuel costs could benefit Democrats by fueling public anger toward Republicans, while also aligning with left-wing goals of accelerating a green transition. The speaker warns that inaction—especially continued military escalation—could lead to a societal collapse comparable to Europe’s energy failures in recent years. Urgent action is needed to stop attacks on energy infrastructure, restore supply chains, and prevent a collapse that could result in widespread suffering, economic ruin, and potential loss of life.

FAQs

The operational stress floor is the minimum level of oil inventory needed to keep pipelines, refineries, and storage tanks functioning. If global inventories drop below this level, equipment fails and demand destruction occurs, leading to rationing and a potential economic collapse.

Ukraine's attacks on Russian fuel infrastructure have disrupted global diesel supply. This has led to higher diesel prices, which in turn causes refineries to shift production from gasoline to diesel, driving up regular gasoline prices.

Gas prices have increased by 52% since January, the highest rise in a midterm election year in a century. This is due to supply disruptions from geopolitical conflicts, including attacks on Russian refineries and tanker shortages in the Red Sea.

The reserve has dropped from 638 million barrels when Biden took office to under 280 million barrels today. About 100 million barrels are currently unusable due to storage issues, leaving the U.S. with limited emergency fuel supplies.

Yes, an export ban could backfire by causing domestic refineries to cut production due to unprofitable diesel output. This would reduce gasoline supply and lead to higher prices for consumers, as gasoline and diesel come from the same oil barrel.

The war has disrupted oil shipping routes through the Strait of Hormuz and increased tanker costs to record levels. This has created a ripple effect, contributing to global supply shortages and higher fuel prices.

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